SEC Filing - Precigen

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pgen-20200630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 001-36042

PRECIGEN, INC.

(Exact name of registrant as specified in its charter)

Virginia

26-0084895

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)

20374 Seneca Meadows Parkway

Germantown,

Maryland

20876

(Address of principal executive offices)

(Zip Code)

(301) 556-9900

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report date)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, no par value

PGEN

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 31, 2020, 172,311,228 shares of common stock, no par value per share, were issued and outstanding.

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PRECIGEN, INC.

FORM 10-Q

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Item No.		Page
PART I - FINANCIAL INFORMATION
1.	Condensed Consolidated Financial Statements (unaudited):	5
	Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019	5
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019	7
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2020 and 2019	9
	Condensed Consolidated Statements of Shareholders' and Total Equity for the Three and Six Months Ended June 30, 2020 and 2019	10
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019	12
	Notes to the Condensed Consolidated Financial Statements	14
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	43
3.	Quantitative and Qualitative Disclosures About Market Risk	61
4.	Controls and Procedures	62

PART II - OTHER INFORMATION
1.	Legal Proceedings	63
1A.	Risk Factors	63
2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
3.	Defaults on Senior Securities	64
4.	Mine Safety Disclosures	65
5.	Other Information	65
6.	Exhibits	65
	Signatures	66

Intrexon^®, Trans Ova Genetics^®, ActoBiotics^®, RheoSwitch^®, UltraVector^®, RTS^®, and RheoSwitch Therapeutic System^® are our and/or our affiliates' registered trademarks in the United States and GenVec™, Precigen™, AdenoVerse™, ActoBio Therapeutics™, Progentus™, AttSite™, and Precigen Therapeutics™ are our and/or our affiliates' common law trademarks in the United States. This Quarterly Report on Form 10-Q, or Quarterly Report, and the information incorporated herein by reference contain references to trademarks, service marks, and trade names owned by us or other companies. Solely for convenience, trademarks, service marks, and trade names referred to in this Quarterly Report and the information incorporated herein, including logos, artwork, and other visual displays, may appear without the ^® or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks, service marks, and trade names. We do not intend our use or display of other companies' trade names, service marks, or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies. Other trademarks, trade names, and service marks appearing in this Quarterly Report are the property of their respective owners. Unless the context requires otherwise, references in this Quarterly Report to "Precigen", "we", "us", and "our" refer to Precigen, Inc.

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Special Note Regarding Forward-Looking Statements

This Quarterly Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this Quarterly Report, including statements regarding our strategy; future events, including their outcome or timing; future operations; future financial position; future revenue; projected costs; prospects; plans; objectives of management; and expected market growth, are forward-looking statements. The words "aim", "anticipate", "assume", "believe", "continue", "could", "due", "estimate", "expect", "intend", "may", "plan", "predict", "potential", "positioned", "project", "seek", "should", "target", "will", "would", and the negatives of these terms or similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about:

•our ability to successfully enter new markets or develop product candidates, including the expected timing and results of investigational studies and preclinical and clinical trials, and our research and development programs;

•the timing or likelihood of regulatory filings for any product candidates we develop and our ability to obtain and maintain regulatory approvals for such product candidates for any indication;

•our intentions and ability to successfully commercialize our product candidates;

•the rate and degree of market acceptance of any products developed by us;

•our ability to successfully execute and achieve benefits from our recent leadership transition plan and organizational restructuring;

•our efforts to hold or generate significant operating capital, including through partnering, potential asset sales of our non-healthcare assets, and operating cost reductions;

•our cash position;

•any delays or potential delays to our clinical trials as a result of the COVID-19 pandemic;

•our estimates regarding expenses, future revenue, capital requirements, and our need for additional financing;

•our strategy and overall approach to our business model, including our efforts to focus our business in the healthcare industry;

•our ability to adapt to changes in laws, regulations, and policies;

•our reliance on and the performance of third parties, including exclusive channel collaborations and joint ventures, or JVs;

•competition from existing technologies and products or new technologies and products that may emerge;

•our expectations related to the use of proceeds from our public offerings and other financing efforts;

•actual or anticipated variations in our operating results;

•market conditions in our industry;

•our ability to retain, recruit, and train key personnel, or the loss of key personnel as a result of illness or otherwise;

•our ability to successfully enter into optimal strategic relationships with our subsidiaries and operating companies that we may form in the future;

•the result of litigation proceedings or investigations that we currently face or may face in the future; and

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•the effects, duration, and severity of the ongoing COVID-19 pandemic and the actions we and others have taken or may take in response.

Forward-looking statements may also concern our expectations relating to our subsidiaries and other affiliates. We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report.

We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report, particularly in Part II, Item 1A. "Risk Factors," that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, JVs, or investments that we may make.

You should read this Quarterly Report, the documents that we reference in this Quarterly Report, our Annual Report on Form 10-K for the year ended December 31, 2019, the other reports we have filed with the Securities and Exchange Commission, or SEC, and the documents that we have filed as exhibits to our filings with the SEC completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Precigen, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)


(Amounts in thousands, except share data)	June 30, 2020		December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	46,713	$	65,793

Short-term investments	86,292		9,260

Receivables
Trade, less allowance for credit losses of $5,690 and $5,201 as of June 30, 2020 and December 31, 2019, respectively	23,337		20,650
Related parties, less allowance for credit losses of $2,312 as of June 30, 2020 and December 31, 2019	294		600

Other	364		4,978
Inventory	12,729		16,097
Prepaid expenses and other	3,266		6,444
Current assets held for sale	—		110,821
Total current assets	172,995		234,643


Property, plant and equipment, net	46,956		60,969
Intangible assets, net	64,759		68,346
Goodwill	54,122		63,754
Investments in affiliates	859		1,461
Right-of-use assets	20,683		25,228
Other assets	1,341		1,362
Total assets	$	361,715	$	455,763

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Precigen, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)


(Amounts in thousands, except share data)	June 30, 2020		December 31, 2019
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable	$	3,650	$	5,917
Accrued compensation and benefits	7,719		14,091
Other accrued liabilities	9,342		12,049
Deferred revenue, including $0 and $877 from related parties as of June 30, 2020 and December 31, 2019, respectively	6,592		5,697
Lines of credit	—		1,922
Current portion of long-term debt, including $31,680 and $31,211 to related parties as of June 30, 2020 and December 31, 2019, respectively	32,108		31,670

Current portion of lease liabilities	4,514		4,182
Related party payables	175		51
Current liabilities held for sale	—		47,333
Total current liabilities	64,100		122,912
Long-term debt, net of current portion, including $25,000 to related parties as of June 30, 2020 and December 31, 2019	191,205		186,321

Deferred revenue, net of current portion, including $31,020 and $30,182 from related parties as of June 30, 2020 and December 31, 2019, respectively	32,858		48,136
Lease liabilities, net of current portion	21,212		23,849
Deferred tax liabilities	2,698		2,834
Other long-term liabilities	100		—
Total liabilities	312,173		384,052
Commitments and contingencies (Note 16)
Shareholders' equity
Common stock, no par value, 400,000,000 shares authorized as of June 30, 2020 and December 31, 2019; 172,285,932 shares and 163,274,880 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively	—		—
Additional paid-in capital	1,802,413		1,752,048
Accumulated deficit	(1,752,221)		(1,652,869)
Accumulated other comprehensive loss	(650)		(27,468)
Total shareholders' equity	49,542		71,711


Total liabilities and shareholders' equity	$	361,715	$	455,763

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Precigen, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)


(Amounts in thousands, except share and per share data)	Three Months Ended June 30,									Six Months Ended June 30,
			2020			2019			2020			2019
Revenues
Collaboration and licensing revenues, including $32 and $5,902 from related parties during the three months ended June 30, 2020 and 2019, respectively, and $230 and $10,692 during the six months ended June 30, 2020 and 2019, respectively	$	4,315		$	6,450		$	15,036		$	12,421
Product revenues	8,540			7,800			13,501			12,637
Service revenues	17,381			18,400			31,327			29,783
Other revenues	188			186			398			580
Total revenues	30,424			32,836			60,262			55,421
Operating Expenses
Cost of products	8,141			8,502			14,230			16,224
Cost of services	6,770			8,218			14,306			15,310
Research and development	14,208			28,239			33,099			55,177
Selling, general and administrative	18,739			19,250			41,757			50,299
Impairment of goodwill	9,635			—			9,635			—
Impairment of assets	12,406			—			12,406			—
Total operating expenses	69,899			64,209			125,433			137,010
Operating loss	(39,475)			(31,373)			(65,171)			(81,589)
Other Expense, Net
Unrealized and realized appreciation in fair value of equity securities and preferred stock, net	—			5,760			—			6,209

Interest expense	(4,592)			(4,353)			(9,184)			(8,658)
Interest and dividend income	773			1,024			1,446			2,385
Other income (expense), net	71			(2,656)			135			(2,110)
Total other expense, net	(3,748)			(225)			(7,603)			(2,174)
Equity in net loss of affiliates	(251)			(716)			(602)			(1,464)
Loss from continuing operations before income taxes	(43,474)			(32,314)			(73,376)			(85,227)
Income tax benefit	120			9			80			22
Loss from continuing operations	(43,354)			(32,305)			(73,296)			(85,205)
Loss from discontinued operations, net of income taxes	—			(6,626)			(26,056)			(15,862)
Net loss	$	(43,354)		$	(38,931)		$	(99,352)		$	(101,067)
Net loss attributable to the noncontrolling interests	—			165			—			1,592
Net loss attributable to Precigen	$	(43,354)		$	(38,766)		$	(99,352)		$	(99,475)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Precigen, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)


(Amounts in thousands, except share and per share data)	Three Months Ended June 30,									Six Months Ended June 30,
			2020			2019			2020			2019
Amounts Attributable to Precigen
Net loss from continuing operations attributable to Precigen	$	(43,354)		$	(32,140)		$	(73,296)		$	(83,613)
Net loss from discontinued operations attributable to Precigen	—			(6,626)			(26,056)			(15,862)
Net loss attributable to Precigen	$	(43,354)		$	(38,766)		$	(99,352)		$	(99,475)
Net Loss per Share
Net loss from continuing operations attributable to Precigen per share, basic and diluted	$	(0.26)		$	(0.21)		$	(0.45)		$	(0.55)
Net loss from discontinued operations attributable to Precigen per share, basic and diluted	—			(0.04)			(0.16)			(0.10)
Net loss attributable to Precigen per share, basic and diluted	$	(0.26)		$	(0.25)		$	(0.61)		$	(0.65)
Weighted average shares outstanding, basic and diluted	164,065,087			153,749,929			162,201,915			153,351,208

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Precigen, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
(Amounts in thousands)	2020		2019		2020		2019
Net loss	$	(43,354)	$	(38,931)	$	(99,352)	$	(101,067)
Other comprehensive income (loss):
Unrealized gain (loss) on investments	(300)		59		272		106
Gain (loss) on foreign currency translation adjustments	1,004		26		(411)		311
Release of cumulative foreign currency translation adjustments to loss from discontinued operations	—		—		26,957		—
Comprehensive loss	(42,650)		(38,846)		(72,534)		(100,650)
Comprehensive loss attributable to the noncontrolling interests	—		199		—		1,581
Comprehensive loss attributable to Precigen	$	(42,650)	$	(38,647)	$	(72,534)	$	(99,069)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Precigen, Inc. and Subsidiaries

Condensed Consolidated Statements of Shareholders' and Total Equity

(Unaudited)


(Amounts in thousands, except share data)	Common Stock							Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Shareholders' Equity
		Shares			Amount
Balances at March 31, 2020	170,656,834		$	—		$	1,797,450	$	(1,354)	$	(1,708,867)	$	87,229
Stock-based compensation expense	—		—			4,897		—		—		4,897
Shares issued upon vesting of restricted stock units and for exercises of stock options	171,682		—			66		—		—		66
Shares issued for accrued compensation	1,457,416		—			—		—		—		—













Net loss	—		—			—		—		(43,354)		(43,354)

Other comprehensive income	—		—			—		704		—		704
Balances at June 30, 2020	172,285,932		$	—		$	1,802,413	$	(650)	$	(1,752,221)	$	49,542


(Amounts in thousands, except share data)	Common Stock							Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Precigen Shareholders' Equity		Noncontrolling Interests		Total Equity
		Shares			Amount
Balances at March 31, 2019	160,615,416		$	—		$	1,732,608	$	(28,325)	$	(1,391,254)	$	313,029	$	21,794	$	334,823
Stock-based compensation expense	—		—			56		—		—		56		5		61
Shares issued upon vesting of restricted stock units and for exercises of stock options and warrants	345,378		—			—		—		—		—		—		—

Shares issued as payment for services	956,630		—			4,857		—		—		4,857		—		4,857








Adjustments for noncontrolling interests	—		—			(72)		—		—		(72)		72		—
Deconsolidation of subsidiary	—		—			—		—		—		—		(21,672)		(21,672)

Net loss	—		—			—		—		(38,766)		(38,766)		(165)		(38,931)
Other comprehensive income (loss)	—		—			—		119		—		119		(34)		85
Balances at June 30, 2019	161,917,424		$	—		$	1,737,449	$	(28,206)	$	(1,430,020)	$	279,223	$	—	$	279,223

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Precigen, Inc. and Subsidiaries

Condensed Consolidated Statements of Shareholders' and Total Equity

(Unaudited)


(Amounts in thousands, except share data)	Common Stock							Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Shareholders' Equity
		Shares			Amount
Balances at December 31, 2019	163,274,880		$	—		$	1,752,048	$	(27,468)	$	(1,652,869)	$	71,711
Stock-based compensation expense	—		—			9,269		—		—		9,269
Shares issued upon vesting of restricted stock units and for exercises of stock options	840,468		—			66		—		—		66
Shares issued for accrued compensation	1,805,405		—			5,100		—		—		5,100
Shares issued as payment for services	392,483		—			930		—		—		930

Shares issued in private placement	5,972,696		—			35,000		—		—		35,000










Net loss	—		—			—		—		(99,352)		(99,352)
Release of cumulative translation adjustments to loss from discontinued operations	—		—			—		26,957		—		26,957
Other comprehensive loss	—		—